Legislative Fix Seen As Only Way to Stop Solar Collapse

The sun may be setting on the once thriving solar sector in New Jersey unless lawmakers act soon, according to industry executives.

For the first time last week, the price owners of solar systems get for the electricity their units produced traded for less than $100 in New Jersey, a spectacular drop, considering the solar renewable energy certificates fetched $655 on the spot market at this point last year.

The steep decline is blamed on an oversupply of the certificates because so many solar developers have rushed to take advantage of lucrative state and federal incentives to install the technology. In March alone, 41 megawatts of new solar capacity was installed, adding to the oversupply situation.

With the prices for the so-called SRECs continuing to collapse, industry officials say the market will dry up by this summer, unable to support new solar development that would be profitable. The only projects moving forward now are ones financed by electric utilities under fixed prices in long-term contracts, said Michael Flett, president of the Flett Exchange, a brokerage firm that buys and sells the certificates.

“The only thing that will help this is a legislative fix," Flett said. He argued the state needs to ramp up how much electricity energy suppliers must purchase from solar systems, a step that might help New Jersey achieve its aggressive solar goals more quickly and less cheaply than originally envisioned.

Fred DeSanti, a spokesman for the New Jersey Solar Energy Coalition, agreed.

“Either this is fixed or this is over until 2016," DeSanti predicted. “Everyone will walk away from the state for two to three years. That’s really where we are at."

If so, it would be a tremendous fall for the solar industry, one of the few sectors in New Jersey that has consistently grown despite the slumbering economy. New Jersey is second to only California in the number of solar systems installed, a fact that has led to the hiring of several thousand workers in the sector.

The Christie administration and legislature have both tried to address the problem, but have been unable, to date, to get the deeply divided solar sector to agree on a consensual approach to halt the decline in prices for the solar credits.

For the most part, virtually all of the industry agrees that the state should ramp up its Renewable Portfolio Standard (RPS), which requires electricity suppliers to buy more of the power they supply to customers from solar systems. Most also back an extension of utility-sponsored solar programs that establish fixed prices for the solar credits and generally cost ratepayers, who ultimately bear the cost of these programs less.

The biggest stumbling block revolves around how many huge grid-supply solar projects -- utility-scale projects that supply their power directly to the regional power grid -- to allow in New Jersey. Unions have argued those projects could provide well-paying jobs to their members if the state allows them to proceed.

Others, however, claim if those projects move forward, it will continue the oversupply of the solar credits, harming many small solar firms that have taken root in the New Jersey.

To avert that possibility, DeSanti’s coalition urged the governor’s office last week to impose a three-year moratorium on systems larger than 2 megawatts. “Everyone was taken by surprise by the [amount] of grid supply projects,” he said.

Still, there is not any consensus on what approach to take.

“All the parties agree that legislation is necessary,” said Lyle Rawlings, president of Advanced Solar Products, a solar company. The question is whether the state can develop a solution to the problem "or just kick the can down the road for a year or so."

DeSanti is more optimistic, noting Senate President Stephen Sweeney (D-Gloucester) has committed to resolving the problem before the legislature breaks for its summer recess in July.

“If they do, all the elements are in place to get us moving again, and avoid any problems in the future,’’ he said.

Assemblyman Upendra Chivukula (D-Middlesex), the chairman of the influential Assembly Telecommunications and Utilities Committee, agreed a legislative response would be forthcoming.

"We're heading in the wrong direction,'' said Chivukula, the sponsor of numerous initiatives to promote solar. "We need to stop the bleeding."

If they don’t, the future is bleak for the solar sector, according to Flett. “If nothing happens, then prices will go down to $40 or $50 and stay there for years," he said.